Say It at the Right Time: Publication Time of Financial News

An Empirical Analysis of Market Reactions to the First Solvency and Financial Condition Reports in the European Insurance Industry

“…For instance, Loughran and McDonald () find a significant relation between their negative word list and stock return volatility, while the positive word list only provides insignificant results. Similarly, Tetlock et al () and Palade et al () observe that the size of the reaction to negative messages is larger than to positive ones. The word list predominantly used in recent studies in this context and the one we use is by Loughran and McDonald (), which was specifically created for a business context and consists of 2,355 negative words after continuous updates.…”

“…As no SFCRs were previously disclosed, no empirical analyses exist on this topic. However, numerous research studies have considered the impact of different types of disclosures (albeit focusing on other industries than the insurance sector), such as 10‐K or 10‐Q files (see, e.g., Asthana and Balsam, ; Griffin, ; Loughran and McDonald, , , ; Jegadeesh and Wu, ; Bonsall IV et al, ; Ertugrul et al, ), annual reports (see, e.g., Baumann and Nier, ; Li, ; Yekini, Wisniewski, and Millo, ), earnings press releases (see, e.g., Henry, ; Davis, Piger, and Sedor, ; Henry and Leone, ), ad hoc filings (see, e.g., Palade, Alfano, and Neumann, ), initial public offering (IPO) prospectuses (see, e.g., Jegadeesh and Wu, ), analyst reports and recommendations (see, e.g., Hsieh, Hui, & Zhang, ) and news from the Dow Jones Newswires or The Wall Street Journal (see, e.g., Tetlock, ; Tetlock, Saar‐Tsechansky, and Macskassy, ). For instance, Baumann and Nier () observe that more extensive disclosures by banks lead to significantly lower stock price volatility.…”

“…A large part of the respective studies also specifically focuses on textual attributes of disclosures, such as tone/sentiment and readability (see Loughran and McDonald, and Li, , for literature reviews, as well as Kearney and Liu, , specifically for tone). Many researchers find a significant relation between the tone of disclosures and abnormal or excess returns (see, e.g., Tetlock, ; Henry, ; Tetlock et al, ; Loughran and McDonald, ; Davis et al, ; Henry and Leone, ; Yekini et al, ; Palade et al, ), stock return volatility or trading volume (see, e.g., Tetlock, ; Loughran and McDonald, ), earnings forecast (see, e.g., Tetlock et al, ), return on assets (RoA) (see, e.g., Davis et al, ) and IPO underpricing (see, e.g., Jegadeesh and Wu, ). In the context of readability, Li () observes more persistent positive earnings for disclosures that are easier to read, and Loughran and McDonald () find stronger announcement effects for better written disclosures.…”